1. Under the Standardised Approach, institutions shall use E* as calculated under Article 223(5) as the exposure value for the purposes of Article 113. In the case of off-balance sheet items listed in Annex I, institutions shall use E* as the value to which the percentages indicated in Article 111(1) shall be applied to arrive at the exposure value.
2. Under the IRB Approach, institutions shall use the effective LGD (LGD*) as the LGD for the purposes of Chapter 3. Institutions shall calculate LGD* as follows:
where:
=
the LGD that would apply to the exposure under Chapter 3 where the exposure was not collateralised;
=
the exposure value in accordance with Article 223(3);
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the fully adjusted exposure value in accordance with Article 223(5).]